Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Short Squeeze • REIT Earnings Begin • Busy Week Ahead

Summary

  • U.S. equity markets were mixed Monday on a choppy day of trading ahead of the busiest week of corporate earnings and a jam-packed slate of economic data and Fed commentary.

  • Adding to last week's gains of 1.9%, the S&P 500 finished higher by 0.4% today and the tech-heavy Nasdaq 100 jumped 0.9% while the Dow Jones Industrial Average declined 37-points.

  • Real estate equities were among the leaders today led by the most heavily-shorted retail REITs as the broad-based Equity REIT ETFs gained 0.7% with 13-of-19 property sectors in positive territory.

  • Troubled mall REITs Macerich (MAC), Pennsylvania REIT (PEI), and Washington Prime (WPG) surged today on the short-squeeze phenomenon sweeping the broader equity market. 5 REITs have gained over 35% so far in early 2021.

  • Manufactured Housing REIT Equity Lifestyle (ELS) and residential mortgage REIT AGNC Investments (AGNC) kicked-off real estate earnings season this afternoon. We'll have a full preview of earnings season in a report this evening.

Real Estate Daily Recap

U.S. equity markets were mixed Monday on a choppy day of trading ahead of the busiest week of corporate earnings and a jam-packed slate of economic data and commentary from the Federal Reserve. Adding to last week's gains of 1.9%, the S&P 500 ETF (SPY) finished higher by 0.4% today and the tech-heavy Nasdaq 100 (QQQ) jumped 0.9% while the Dow Jones Industrial Average (DIA) gave back 37-points. Real estate equities were among the leaders today led by the most heavily-shorted retail REITs as the broad-based Equity REIT ETF (VNQ) gained 0.7% with 13 of 19 property sectors in positive territory while Mortgage REITs (REM) gained 0.1%.

As discussed in our Real Estate Weekly Outlook, equity markets entered the week near record-high territory as recent data has indicated that the pandemic has finally shown signs of easing in recent weeks while the pace of the vaccine rollout has intensified with over 22 million Americans now successfully vaccinated. This vaccine rollout has, in part, been responsible for a short-squeeze phenomenon among many of the most heavily shorted names including GameStop (GME) and mall REITs. Seven of the eleven GICS equity sectors finished higher on the day, led by the Utilities (XLU), Consumer Staples (XLP), and Commerical Real Estate (XLRE) sectors.

On that topic, troubled mall REITs Macerich (MAC), Pennsylvania REIT (PEI), and Washington Prime (WPG) surged today on this short-squeeze phenomenon sweeping the broader equity market, extending their breathtaking gains so far in 2021 following their punishing declines last year. Per data from ShortSqueeze.com, these mall operators are among the most heavily shorted REITs, particularly MAC which has a short interest of nearly 60%. Other heavily-shorted REITs include Tanger Outlets (SKT) at 50%, Seritage Growth (SRG) at 40%, and GEO Group (GEO) at 19%.

Real estate earnings season kicks this week with a handful of reports and will high high-gear over the next five weeks as more than 200 REITs and housing industry companies reporting earnings. Rent collection - a metric that was rarely reported in the pre-COVID-19 era - has become the most critical statistic tracked by investors due to its impact on dividend-paying capacity. REITs ended 2020 as the second-worst performing out of 11 GICS equity sectors, but improving rent collection and dividend commentary could be a positive catalyst to drive a recovery. We'll publish our Real Estate Earnings Preview tonight on The REIT Forum.

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Disclosure: A complete list of holdings and Real Estate and Housing Index definitions and holdings are available at HoyaCapital.com. Hoya Capital Real Estate advises an Exchange Traded Fund listed on the NYSE. Hoya Capital is long all components in the Hoya Capital Housing 100 Index.

Additional Disclosure: It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Data quoted represents past performance, which is no guarantee of future results. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy.

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